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Study Shows Canadian Financial Advisors are Comfortable Engaging With Clients on ESG, but Subject Matter Knowledge Is Limited

·5 min read

Many advisors expressed concerns about greenwashing and lack of standardization

TORONTO, January 20, 2022--(BUSINESS WIRE)--The vast majority of Canadian financial advisors are comfortable discussing environmental, social and governance (ESG) issues with clients, but advisors’ knowledge of the subject matter is limited, according to a new survey from the Responsible Investment Association (RIA).

The 2021 RIA Advisor Opinion Survey, which is based on a Newcom Media poll of 539 financial advisors in Canada, found that 85% of the advisors surveyed said they’re very or somewhat comfortable starting a conversation about responsible investment (RI), which refers to investments that incorporate ESG issues. However, the results show that advisors’ knowledge of the subject is low, as only 6% of respondents correctly identified 3 true statements out of 10 statements about RI. Moreover, some advisors appear to be overestimating their knowledge, as nearly one-fifth of advisors who claimed to have excellent or very good knowledge of RI failed to correctly identify any of the 3 true statements about RI in the same assessment.

The survey, sponsored by Mackenzie Investments, NEI Investments and Vancity, found that environmental issues top the list of concerns for advisors’ clients. In a year that saw an international focus on net zero emissions and climate change at COP26, 84% of advisors reported that environmental topics are the most important ESG issues among their clients.

Many advisors shared concerns about RI, which may be preventing them from initiating RI-related conversations. For example, 81% of respondents expressed concern about greenwashing, and 74% expressed concern about lack of standards. Many advisors left comments indicating that standardization around responsible investments would help them to overcome these concerns.

"We are encouraged to find that so many advisors are willing to have a conversation about RI with their clients," said Mary Robinson, Director of Research and Membership with the RIA. "But this research also shows that education is critical. Many leading advisors have taken the leap and undergone formal training in RI, and we hope this research encourages many more to do so."

"We are proud to be the lead sponsor of the RIA’s inaugural Advisor Opinion Survey. Financial advisors play a significant role in Canada’s financial systems by ensuring the financial health of Canadian investors," said Fate Saghir, Senior Vice President, Head of Sustainability at Mackenzie Investments. "We need to understand the challenges and opportunities that exist for advisors in incorporating responsible investing into their client conversations. We are thankful to all the respondents to the survey; the insights reinforce the much-needed work required to further awareness, understanding, and adoption of responsible investments."

"We’ve known for a long time just how important it is for advisors to have informed, meaningful RI conversations with their clients," said Frederick M. Pinto, SVP and Head of Asset Management at Aviso Wealth, the parent company of NEI. "That’s why we’ve stepped up our efforts to help them incorporate RI into their businesses and deliver unique RI insights. They shouldn’t have to do this alone."

"With interest in sustainable investing growing and more products entering the market to meet demand, advisors must be able to guide their clients competently and with confidence. This is why all of Vancity’s advisors complete the Responsible Investment Specialist (RIS) designation through the RIA," said Joe Reid, Vice President, Wealth Management and Impact Investing at Vancity. "We are pleased to support the RIA on this research which provides valuable insights for advisors and investment firms."

Highlights:

  • 85% of advisors said they’re very or somewhat comfortable starting a conversation about RI, while 15% indicated they’re not comfortable doing so.

  • Among advisors who have discussed ESG or RI with clients, 37% reported that they usually initiate the conversations, while 32% indicated that the client does so, and 31% said that they and their clients start these conversations equally.

  • 94% of advisors who said their RI knowledge is excellent or very good also said they are comfortable starting RI-related discussions. In comparison, only 35% of advisors who described their knowledge as poor said they are comfortable taking the lead.

  • Some advisors appear to be overestimating their knowledge. Advisors’ demonstrable knowledge was similar regardless of their self-assessed knowledge levels. Of those advisors who said their RI knowledge was excellent or very good, one-fifth did not correctly identify 3 true statements out of 10 statements about RI.

  • 84% of advisors reported that environmental matters (such as climate change, biodiversity, and toxic waste) are the most important ESG issues for their clients.

  • Advisors who have discussed ESG or RI with their clients cited various reasons, including client interest (41%), the desire to make suitable investment recommendations (25%), their sense of fiduciary duty (12%), and to distinguish their practice and services (12%).

  • Many advisors also shared concerns about RI, which may be preventing them from initiating RI-related conversations. For example, 81% of respondents expressed concern about greenwashing, and 74% expressed concern about lack of standards. Many advisors left comments indicating that standardization around responsible investments would help them to overcome their concerns.

View the full report here.

About the RIA Advisor Opinion Survey

The RIA published the 2021 RIA Advisor Opinion Survey to better understand the RI landscape among Canadian financial advisors. The survey is based on data collected by Newcom Media from 539 Canadian financial advisors in September, 2021. For the purposes of this research, "financial advisor" includes the following categories: "financial advisor" (68% of respondents), "investment advisor / full-service broker" (25% of respondents), and "advisor with a bank branch / trust company / credit union" (7% of respondents). All respondents reported being registered with at least one regulator. The results are considered accurate to within +/-3.5%, with 90% certainty.

About the Responsible Investment Association (RIA)

The RIA is Canada’s industry association for responsible investment (RI). The RIA aims to drive the growth and development of RI in Canada, with a vision to align capital with sustainable and inclusive development as codified in the Paris Agreement and the UN Sustainable Development Goals. The RIA’s membership includes asset managers, asset owners, advisors, and service providers. Learn more at www.riacanada.ca.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220120005298/en/

Contacts

Nick Buccheri
Director, Operations
Responsible Investment Association
nick@riacanada.ca
+1(416) 461-6042 x5